The Debt Ceiling and the Appropriations Process

Katina Slavkova | May 3, 2023

The partisan and intra-branch posturing on the debt ceiling, on display since January, has finally yielded actual legislative text.  Last week Speaker Kevin McCarthy successfully shepherded his conference to pass a debt ceiling bill, accurately characterized as a “bare-minimum victory on a doomed bill.” This description of the House GOP’s initial bargaining offer perfectly captured the current congressional mood and challenging negotiating dynamic between House Republicans and President Biden. While the overriding priority in resolving the debt limit stand-off is to avoid an economically debilitating default on the national debt, the high-stakes fiscal drama also carries significant ramifications for the FY24 appropriations cycle.

This year’s appropriations cycle was already off to a slow start even without the debt ceiling drama.  The President’s Budget was delivered late, and Congress has not passed a budget resolution.  In this environment the Limit, Save, Grow Act (as the House debt limit bill is called) has the opportunity to both influence policy choices and priorities, and complicate the timely passage of appropriations bills.

While Congress is not new to difficulties with appropriations, our current episode has many feeling a sense of 2011 déjà vu. Tying debt limit legislation to broader budget plan negotiations can significantly complicate the timing and outcome for next fiscal year’s government funding. There are parallels to the spending debates of 2011. Back then, after much grief and turmoil, Congress enacted the Budget Control Act of 2011 that imposed severe limits on defense and nondefense discretionary spending under a tool called sequestration. This was not a popular move. Rather than endure self-imposed painful cuts to favored federal programs, Members frequently labored under shutdown threats and interminable continuing resolutions in order to cobble together last-minute budget deals that raised spending levels over the statutory caps, roughly every two years (2013, 2015, 2018, 2019).

Judging by the latest developments in the debt ceiling debate, both House and Senate appropriators may again be in for a whole lot of pain trying to fund the federal government by October 1. As has been often the case, the biggest hurdle right now is the lack of an agreement on what the top line numbers will be for the defense and nondefense discretionary accounts. In addition to reverting spending to FY22 levels for the next 10 years (with only 1% maximum annual growth), the debt ceiling legislation that the House passed envisions an approximately $130 billion cut for FY24 from current levels but crucially does not specify where to trim the spending. Supposedly this unenviable feat would have to be performed by an historic all-female leadership of the appropriations committees. Deciding how to spread the pain from the cuts between defense and nondefense spending would require a skillful balancing act on their part.

And here is where it gets trickier. House Republicans Mike Rogers and Ken Calvert, who chair the Armed Services and Defense Appropriations panels, respectively, have firmly rejected any cuts to the Pentagon budget. In fact, they have been fairly vocal in criticizing President Biden’s proposed 3.3% increase for FY24 as inadequate and unacceptable. There are plenty of other defense hawks in Congress who will certainly push for protecting defense accounts from the envisioned cuts in the debt ceiling bill while simultaneously asking for a hefty increase.

In addition, it’s not entirely clear at the moment whether these defense budget advocates have received any spoken (or unspoken) guarantees by Speaker McCarthy on exempting their favored spending from the cuts. Obviously both Rogers and Calvert voted in support of the debt legislation and the unspecified cuts it imposes. But based on their uncompromising stance in shielding the defense budget, they presumably assume any cuts will come on nondefense discretionary spending. This is hardly a sustainable position. At a minimum, from the perspective of the chairs of the remaining 11 appropriations subcommittees, absorbing unrealistic defense increases (or even level spending) on the backs of programs under their jurisdiction is quite problematic. Republicans in the House will have to first find a way to reconcile some of these diverging stances if the appropriations cycle is to proceed on time.

For her part, Rep. Kay Granger, chairwoman of the full Appropriations committee, issued a rather vague statement after the passage of the Limit, Save, Grow Act. Reading between the lines, it seems she too is emphasizing defense and other national security spending priorities for the new fiscal year. This is hardly surprising considering her background and work in Congress. But the larger problem of clarity and agreement on what the starting top line numbers are still remains.

Perhaps some of that mystery will be lifted in late May and early June when some of the key congressional committees are slated to begin their mark-up activities. But this is hardly encouraging or indicative in any way of a timely passage of the FY24 funding bills. And of course, all of this is moot barring a miracle buy-in from the Democrat-controlled Senate and President Biden. Welcome to 2011!

Katina Slavkova is a Fellow and Director of the Certificate Program at the Government Affairs Institute

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